Navigating Challenges: Relpol's Journey Amidst Economic Shifts
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Relpol had a great start to last year, but the economic situation started to weaken from Q2'23. According to preliminary results, the company recorded an operating loss in Q1'24. The management has taken optimisation measures and is signalling a slight upturn in the form of an increase in new orders. However, the portfolio horizon remains short. The company is now faced with the challenge of securing new markets and customers, following the completion of a key investment project to increase production capacity. The weak results and the slippage of management's expectations for an upturn prompt us to revise our forecasts downwards. Following the model update, we now set our target price at PLN 6.25, which implies staying with our Hold recommendation.
Recent results
In 2023, the company generated revenue of PLN 159.5bn (+6% y/y) and net profit of PLN 8.6m (including PLN 9.2m in 1H'23). In Q4'23 alone, revenue amounted to PLN 27.8m (-26% y/y), and net profit amounted to PLN 1.5m (with the release of a portion of Q3'23 write-off for R&D following a grant settlement responsible for +1.8m at the EBIT level). The company has already reported preliminary Q1'24 standalone results (full report on 22 May, consolidated results not expected to be materially different). Revenues fell 42%, and the net loss was PLN -1.9m (vs. PLN 4.9m profit in Q1'23). The scale of the revenue decline was already signalled by the Management Board in February, and the net loss is larger than we had anticipated in the latest quarterly forecasts.
